BOSTON FOUNDATION, INC. Consolidated Financial Statements. June 30, 2017 and (With Independent Auditors Report Thereon)

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Consolidated Financial Statements (With Independent Auditors Report Thereon)

KPMG LLP Two Financial Center 60 South Street Boston, MA 02111 Independent Auditors Report The Board of Directors Boston Foundation, Inc.: We have audited the accompanying consolidated financial statements of Boston Foundation, Inc. and its affiliates, which comprise the consolidated statements of financial position as of, the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Boston Foundation, Inc. and its affiliates as of, and the changes in their net assets and their cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. December 14, 2017 KPMG LLP is a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

Consolidated Statements of Financial Position Assets 2017 2016 Cash and cash equivalents $ 5,499 5,500 U.S. Treasuries 20,891 23,132 Program-related receivables and other assets 10,374 8,823 Contributions receivable, net 1,546 2,136 Investments, at fair value 1,072,981 927,453 Noncash donations held for sale 314 397 Fixed assets, net 3,681 297 Total assets $ 1,115,286 967,738 Liabilities and Net Assets Liabilities: Accounts payable and accrued liabilities $ 7,210 5,876 Grants payable 2,167 1,220 Total liabilities 9,377 7,096 Net assets: Unrestricted 649,338 530,956 Temporarily restricted 219,531 196,418 Permanently restricted 237,040 233,268 Total net assets 1,105,909 960,642 Total liabilities and net assets $ 1,115,286 967,738 See accompanying notes to consolidated financial statements. 2

Consolidated Statement of Activities Year ended June 30, 2017 Temporarily Permanently Unrestricted restricted restricted Total Revenues and investment activity: Contributions $ 189,985 8 3,772 193,765 Service fees 2,043 2,043 Interest and dividends, net of fees 4,949 3,236 8,185 Unrealized and realized net gains on investments and trusts 52,942 47,419 100,361 Net assets released from restrictions 27,550 (27,550) Total revenues and investment activity 277,469 23,113 3,772 304,354 Expenses: Grants 137,247 137,247 Change in split-interest trusts (134) (134) Program support 5,461 5,461 Operating expenses: Grantmaking and civic leadership 3,005 3,005 Development and donor services 4,181 4,181 Finance and administration 9,327 9,327 Total operating expenses 16,513 16,513 Total expenses 159,087 159,087 Change in net assets 118,382 23,113 3,772 145,267 Net assets, beginning of year 530,956 196,418 233,268 960,642 Net assets, end of year $ 649,338 219,531 237,040 1,105,909 See accompanying notes to consolidated financial statements. 3

Consolidated Statement of Activities Year ended June 30, 2016 Temporarily Permanently Unrestricted restricted restricted Total Revenues and investment activity: Contributions $ 103,125 39 4,005 107,169 Service fees 1,582 1,582 Interest and dividends, net of fees 4,453 2,763 7,216 Unrealized and realized net losses on investments and trusts (8,947) (8,933) (17,880) Reclassification of net assets 565 35 (600) Net assets released from restrictions 26,047 (26,047) Total revenues and investment activity 126,825 (32,143) 3,405 98,087 Expenses: Grants 101,862 101,862 Change in split-interest trusts 68 68 Program support 5,742 5,742 Operating expenses: Grantmaking and civic leadership 3,683 3,683 Development and donor services 3,886 3,886 Finance and administration 7,895 7,895 Total operating expenses 15,464 15,464 Total expenses 123,136 123,136 Change in net assets 3,689 (32,143) 3,405 (25,049) Net assets, beginning of year 527,267 228,561 229,863 985,691 Net assets, end of year $ 530,956 196,418 233,268 960,642 See accompanying notes to consolidated financial statements. 4

Consolidated Statements of Cash Flows Years ended 2017 2016 Cash flows from operating activities: Cash received from contributions and service fees $ 179,597 104,217 Interest and dividends received, net of fees 7,894 6,763 Annuity and beneficiary payments (246) (244) Grants paid (136,038) (101,004) Cash paid: For program expenses (5,461) (5,742) To employees and suppliers (15,884) (15,046) Net cash provided by (used in) operating activities 29,862 (11,056) Cash flows from investing activities: Proceeds from sales of investments 256,666 271,600 Purchases of investments (287,834) (283,726) Purchases of fixed assets (2,467) (88) Net cash used in investing activities (33,635) (12,214) Cash flows from financing activities: Contributions to permanently restricted funds 3,772 4,005 Net cash provided by financing activities 3,772 4,005 Net change in cash and cash equivalents (1) (19,265) Cash and cash equivalents, beginning of year 5,500 24,765 Cash and cash equivalents, end of year $ 5,499 5,500 Reconciliation of change in net assets to net cash used in operating activities: Change in net assets $ 145,267 (25,049) Adjustments to reconcile change in net assets to net cash used in operating activities: Depreciation 269 225 Change in annuity and beneficiary payables (298) (323) Change in grants payable 947 552 Change in contributions receivable, net 590 (528) Contributions of investments (13,110) Changes in other assets and liabilities, net 330 192 Contributions restricted for long-term investment (3,772) (4,005) Unrealized and realized net (gain) loss on investments and trusts (100,361) 17,880 Net cash provided by (used in) operating activities $ 29,862 (11,056) Supplemental disclosure of noncash investing activity: Change in accounts payable from fixed asset additions $ 1,186 See accompanying notes to consolidated financial statements. 5

(1) Description of the Boston Foundation (a) Organization Founded in 1915, the Boston Foundation, Inc. (the Foundation) is one of the nation s oldest and largest community foundations a major grantmaker, partner in philanthropy, provider of information, and civic leader addressing Greater Boston s most pressing challenges. The Foundation is a tax-exempt organization as described in Section 501(c)(3) of the Internal Revenue Code (the Code) and is generally exempt from income taxes pursuant to Section 501(a) of the Code and qualifies as a public charity under Section 170(b)(1)(A)(vi) of the Code. The Foundation has not taken any tax positions which would have a material effect, individually or in the aggregate, upon the Foundation s financial statements. The Foundation believes it has not taken any significant uncertain tax positions or any tax positions that would jeopardize the Foundation s tax-exempt status. The Philanthropic Initiative, Inc. (TPI), an internationally recognized provider of customized philanthropic consulting, operates as a distinct unit of the Boston Foundation. (b) Activity As Greater Boston s community foundation, the Foundation devotes its resources to building and sustaining a vital and prosperous city and region, where justice and opportunity are extended to everyone. The Foundation s primary purposes are threefold: to make charitable grants to qualified recipients; to assist donors with their philanthropic goals; and to be a civic leader, convener, and information provider in the Boston community. The Foundation receives support directly from the public. Due to the generosity of donors, the Foundation is able to serve as a major grantmaker in Greater Boston, supporting hundreds of not-for-profit organizations that are helping to build a strong and healthy community. (2) Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying consolidated financial statements, which are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (GAAP), have been prepared to focus on the Foundation as a whole and to present balances and transactions according to the existence or absence of donor-imposed restrictions. The consolidated financial statements include the accounts of the Foundation and those of its affiliated supporting organizations, which are also 501(c)(3) exempt organizations. The total net assets of the supporting organizations were $22,456 and $19,897 as of, respectively. Inter-organizational transactions and balances have been eliminated in consolidation. 6 (Continued)

(b) Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. (c) Classification of Net Assets The Foundation reports information regarding its financial position and activities in three classes of net assets based upon the existence or absence of donor-imposed restrictions, as follows: Unrestricted net assets have no donor-imposed or legal stipulations as to their use. Unrestricted net assets include donor-advised funds. Temporarily restricted net assets contain donor-imposed stipulations as to the timing of their availability or use for a particular purpose. These net assets are released from restrictions when the specified time elapses or actions have been taken to meet the restrictions. Permanently restricted net assets have donor-imposed stipulations that neither expire with the passage of time nor can be removed by actions of the Foundation and consist primarily of the historic dollar value of gifts to establish or add to the Foundation s donor-restricted endowment funds. Net assets of such funds in excess of their historic dollar value are classified as temporarily restricted net assets until appropriated by the Board of Directors (the Board) and spent in accordance with the standard of prudence imposed by state law. The Articles of Organization of the Foundation include a variance power provision, which gives the Board the power to modify any purpose-related restriction or condition placed on gifts, if in its sole judgment the Board determines that the restriction becomes, in effect, incapable of fulfillment due to the changing needs of the community. During 2017, the Board did not utilize variance power. During 2016, the Board utilized variance power to 1) grant out the $12 balance of a scholarship fund to a not-for-profit organization s scholarship program, 2) extend the terms of a designated fund to include conservation of any public art, 3) to grant out a $12 fund balance to a not-for-profit, and 4) to grant out a $3 fund balance to a not-for-profit. 7 (Continued)

(d) Spending Policy Generally, the Foundation manages its funds using a total return concept, which emphasizes total investment return, including interest and dividends and realized and unrealized gains and losses. Annually the Foundation s Board determines the level of grantmaking based on two components that serve to stabilize annual spending levels and preserve the value of the endowment over time. In fiscal years 2017 and 2016, those factors are 70% of the prior year s spending, adjusted for inflation, plus 30% of a spending rate applied to the estimated fair value of its endowment. The discretionary endowment is made up of funds with no restrictions placed on the way income may be used and funds identified for utilization in broad fields of interest. The designated endowment is composed of funds created for specifically named agencies or projects. The spending policy rates were as follows: 2017 2016 Discretionary endowment 6.4 % 6.4 % Designated endowment 5.0 5.0 Endowed donor advised funds 5.0 5.0 For fiscal year 2018, the Board of Directors has approved the spending policy rate of 6.0% for its discretionary endowment and 5.0% for designated endowments and endowed donor advised funds, except for underwater funds where the current market value is less than the aggregate gifts to the fund. For these underwater funds, the fiscal year 2018 spending rates are 5.0% and 4.5%, respectively. (e) Cash and Cash Equivalents Except for amounts included in the Foundation s investment pools, the Foundation records liquid investments purchased with original maturities of less than 90 days as cash equivalents. (f) Fair Value Measurements Investments are reported at estimated fair value. GAAP defines fair value and requires certain disclosures about fair value measurements. Fair value represents the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants as of the measurement date. GAAP also establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 inputs are derived from valuation methodologies, including pricing models, discounted cash flow models, and similar techniques, and are not based on market, exchange, dealer, or broker-traded transactions. In addition, Level 3 valuations incorporate assumptions and projections that are not observable in the market, and significant professional judgment is required in determining the fair value assigned to such assets or liabilities. 8 (Continued)

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Foundation utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The majority of the Foundation s investments are held in entities for which fair value is estimated using net asset value (NAV) as reported by the fund manager as a practical expedient, unless it is probable that the investment will be sold for a different amount from NAV. As of, the Foundation had no plans or intention to sell investments at amounts different from NAV. Such NAV-measured investments are not categorized in the fair value hierarchy. Although the Foundation s managers adhere to fair value accounting as required by the Financial Accounting Standards Board Accounting Standards Codification (ASC) 820-10, Fair Value Measurements and Disclosures, because of the inherent uncertainties in valuation assumption, the estimated fair values for investments may differ significantly from values that would have been used had a ready market existed, and the differences could be material. Such valuations are determined by fund managers and generally consider variables such as operating results, earnings of the underlying holdings, projected cash flows, recent sales prices, and other pertinent information. The NAVs or their equivalent, as estimated and reported by the investment managers, are reviewed by the Foundation s Treasurer, Chief Investment Officer, and its investment consultant. (g) U.S. Treasuries In fiscal year 2016, the Foundation began investing available cash and cash equivalents in U.S. Treasuries. The total of cash and cash equivalents and U.S. Treasuries represent the Foundation s resources available to meet current operating needs. The U.S. Treasuries are carried at fair value and classified in Level 1 of the fair value hierarchy. The Treasuries have maturities at the date of purchase from one to five years. (h) Contributions Receivable Contributions receivable consist of unconditional promises to give that are expected to be collected within one year. (i) Fixed Assets The Foundation capitalizes expenditures over $5 incurred to purchase office equipment, computer systems, furniture, and leasehold improvements. Depreciation is recognized over the estimated useful life of the assets, typically from three to five years, on a straight-line basis. Leasehold improvements are amortized over the lesser of their useful lives or the remaining term of the lease. (j) Grants Expense The Foundation records grants as expenses when all conditions stipulated by the grant have been substantially met by the grantee. Grants issued with future payment dates and without substantive conditions are accrued and expensed when approved by the Board of Directors or committed to grantees. Grants scheduled to be paid after one year are discounted at a rate commensurate with the duration involved. 9 (Continued)

(k) Contributions and Bequests Contributions, including unconditional promises from donors, are recorded as revenue at fair value when received. Promises to give subject to donor-imposed stipulations that the corpus be maintained permanently are shown as increases in permanently restricted net assets. Conditional promises to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Bequests generally are accrued as revenue when the respective will has been admitted to probate and all appeal periods have expired. Contributions to be received after one year are discounted at the appropriate rate commensurate with the risks and duration involved. (l) Program Support Program support consists primarily of additional expenses incurred related to individual programs or programs for which the funding is shared by others. These expenses are separate and distinct from the Foundation s operating expenses. Examples of current programs are the Boston Indicators Project, the Skillworks Initiative and Success Boston. (m) Operating Expenses Operating expenses include salaries and benefits, rent, and other overhead expenses that are incurred in the operation of the Foundation overall and are not specifically attributable to a particular fund or program. An administrative fee ranging from 0.5% to 1.2% of the net asset balance by fund is charged to each donor advised, discretionary and designated fund to cover operating expenses. For some funds, an allocation of overhead is charged based upon a percentage (20% to 40%) of directly charged personnel costs. (3) Program-Related Receivables and Other Assets The Foundation invests a portion of its funds in projects that advance its philanthropic purposes by providing loans, known as program-related investments, to certain not-for-profit organizations. At June 30, 2017 and 2016, these loans, included in program-related receivables and other assets net of unamortized discounts of $1,373 and $1,397, totaled $9,906 and $8,442, respectively, with various repayment dates beginning in 2018 and ending in 2032. In addition, the Foundation has a $4,000 loan guarantee expiring in 2021 for the purpose of building or improving charter schools in Massachusetts that have been funded by the Massachusetts Development Finance Agency and a $3,000 loan guarantee expiring in 2031 for the purpose of reducing the cash-funded reserves in credit projects that have a first mortgage financing from the Massachusetts Housing Partnership Fund Board. The Foundation s $4,000 loan guarantee serves as a backup to guarantees made by other entities and the Foundation s $3,000 guarantee is matched by the same amount from another foundation. As of, the Foundation s guarantees have not been drawn. The Foundation believes the estimated fair value of the guarantees and any potential liability is not material. (4) U.S. Treasuries As of June 30, 2017, U.S. Treasuries with a par value of $21,000 mature between one and five years. As of June 30, 2016, U.S. Treasuries with a par value of $10,000 mature within one year, and $13,000 mature 10 (Continued)

between one and five years. The net premium and unrealized gain on the notes was $120 as of June 30, 2017 and $165 as of June 30, 2016. (5) Investments The Foundation maintains three investment pools as part of its Fund for the 21st Century for investing its assets as follows: Balanced Plus Pool Approximately 56 investment management firms manage the assets in this pool. Approximately 20% of this pool is allocated to private partnerships holding interests in private equity, venture capital, real estate, timber, and energy assets. This asset mix is intended to produce the highest long-term investment return. The Foundation invests its endowment assets in this pool. Balanced Pool Approximately 29 investment management firms manage the assets in this pool. This pool does not include private partnerships, which use strategies that are generally expected to yield higher returns over time, and accordingly, this asset allocation is expected to produce a slightly lower investment return. Typically, donor advised funds desiring a higher allocation to U.S. Treasury bonds and limited exposure to illiquid investments are invested in this pool. Short-Term Pool This pool is invested in money market funds and U.S. Treasury bills. Typically, donor advised funds intending to avoid equity market exposure and to make grants in the near term are invested in this pool. The following table summarizes the Foundation s investments in the fair value hierarchy as of June 30, 2017: June 30, 2017 Investments Investments classified in measured fair value hierarchy at NAV Level 1 Level 2 Level 3 Total Global equities $ 359,788 69,092 428,880 Flexible capital 226,996 226,996 Private equity and venture capital 99,309 99,309 Real assets: Real estate 37,453 7,849 45,302 Timber 17,890 17,890 Energy 14,774 2,587 17,361 70,117 10,436 80,553 Fixed income: Money markets 39,577 39,577 U.S. Treasuries 124,591 124,591 U.S. TIPS 26,600 26,600 164,168 26,600 190,768 Other investments 23,339 23,136 46,475 Total investments $ 756,210 267,035 26,600 23,136 1,072,981 11 (Continued)

The following table summarizes the Foundation s investments in the fair value hierarchy as of June 30, 2016: June 30, 2016 Investments Investments classified in measured fair value hierarchy at NAV Level 1 Level 2 Level 3 Total Global equities $ 279,389 80,170 359,559 Flexible capital 213,816 213,816 Private equity and venture capital 90,816 90,816 Real assets: Real estate 32,490 6,880 39,370 Timber 18,650 18,650 Energy 12,315 2,353 14,668 63,455 9,233 72,688 Fixed income: Money markets 27,036 27,036 U.S. Treasuries 104,798 104,798 U.S. TIPS 23,684 23,684 131,834 23,684 155,518 Other investments 4,145 22,384 8,527 35,056 Total investments $ 651,621 243,621 23,684 8,527 927,453 12 (Continued)

(a) Level 3 Investment Activity The following table presents the Foundation s activity for the fiscal years ended June 30, 2017 and 2016 for investments classified in Level 3: Other investments Fair value as of July 1, 2015 $ 8,307 Purchases 510 Sales and distributions (747) Net realized and unrealized gains 457 Fair value as of June 30, 2016 $ 8,527 Fair value as of July 1, 2016 $ 8,527 Purchases 250 Sales and distributions (4,033) Transfer from NAV of contributed investments 4,145 New contributed investments 13,110 Net realized and unrealized gains 1,137 Fair value as of June 30, 2017 $ 23,136 There were no transfers between levels in 2016. 13 (Continued)

(b) Liquidity Investment fair values are aggregated below by redemption or liquidation period, availability, or sale in the case of marketable securities. Certain investments are redeemable at NAV under the original terms of the subscription agreement and entity agreements. The majority of such redemptions require 90 days or more written notice prior to the redemption period. June 30, 2017 Daily Monthly Quarterly 1 to 5 years Illiquid Total Balanced Plus Pool: Money markets $ 14,884 14,884 U.S. Treasury notes 49,744 49,744 U.S. TIPS 24,044 24,044 Global equities 64,925 201,929 136,160 403,014 Flexible capital 18,544 165,144 27,080 210,768 Private equity and venture capital 99,309 99,309 Real assets 7,324 21,532 7,604 38,254 74,714 160,921 223,461 162,308 165,144 164,643 876,477 Balanced Pool: Money markets 3,462 3,462 U.S. Treasury notes 10,036 10,036 U.S. TIPS 2,556 2,556 Global equities 4,167 12,960 8,739 25,866 Flexible capital 1,428 12,716 2,085 16,229 Real assets 3,112 2,251 475 5,838 23,333 15,211 10,642 12,716 2,085 63,987 Short-Term Pool: Money markets 21,231 21,231 U.S. Treasuries 64,811 64,811 86,042 86,042 Other investments 23,339 23,136 46,475 Total investments $ 293,635 238,672 172,950 177,860 189,864 1,072,981 14 (Continued)

(c) Investment Returns Investment returns for the years ended June 30 were as follows: 2017 2016 Interest and dividends, net of fees $ 8,185 7,216 Unrealized and realized net gains (losses) on investments and trusts 100,361 (17,880) Total return $ 108,546 (10,664) Interest and dividends are shown net of third-party investment management and custody fees. Investment management and custody fees paid directly to the managers for the years ended June 30, 2017 and 2016 were $4,627 and $4,354, respectively. Additional investment fees that were not paid directly to the managers have been netted against the return on certain investments. It is not practical to determine the amounts of such fees. Investment returns for the years ended June 30 were as follows: 2017 2016 Balanced Plus Pool $ 98,213 (11,592) Balanced Pool 5,529 (558) Short-Term Pool 389 162 Other investments 4,064 1,148 U.S. Treasuries 351 176 Total return $ 108,546 (10,664) (d) Commitments Private equity, venture capital, and real asset investments are generally made through limited partnerships. Under the terms of these agreements, the Foundation is obligated to remit additional funding periodically as capital calls are exercised by the manager. These partnerships have a limited existence, generally around 10 years, and such agreements may provide for annual extensions for the purpose of disposing of portfolio positions and returning capital to investors. However, depending on market conditions, the inability to execute the fund s strategy, and other factors, a manager may extend the term of a fund beyond its originally anticipated existence or may wind down the fund prematurely. The Foundation cannot anticipate such changes because they are based on unforeseen events, but should they occur they may result in less liquidity or return from the investment than originally anticipated. As a result, the timing and amount of future capital calls expected to be exercised in any particular year is uncertain. 15 (Continued)

Unfunded commitments at June 30 were as follows: 2017 2016 Private equity and venture capital $ 48,190 59,589 Real assets 3,698 6,976 Total unfunded commitments $ 51,888 66,565 The above amounts are generally payable within ten days of the receipt of a capital call notice. The Foundation has no control as to when a request for funding will be received. It is currently anticipated that the Foundation will be required to fund these commitments within the next three years, but the specific timing is ultimately subject to the discretion of the fund managers. (6) Endowment Net Assets Endowment net assets consist of the following: Temporarily Permanently Unrestricted restricted restricted Total As of June 30, 2017: Endowment funds $ 2,272 201,026 237,040 440,338 As of June 30, 2016: Endowment funds $ 406 179,002 233,268 412,676 GAAP provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) and requires comprehensive disclosures regarding donor-restricted endowment funds. The Foundation s endowment as of, respectively, consists of 255 and 251 individual funds established for a variety of purposes, including donor-restricted endowment funds. The Foundation is subject to UPMIFA as adopted by the Commonwealth of Massachusetts. Under UPMIFA, the Board of Directors has discretion to determine appropriate expenditures of a donor-restricted endowment fund in accordance with a robust set of guidelines about what constitutes prudent spending. UPMIFA permits the Foundation to appropriate for expenditure or accumulate so much of an endowment fund as the Foundation determines to be prudent for the uses, benefits, purposes and duration for which the endowment fund is established. Seven criteria are to be used to guide the Foundation in its yearly expenditure decisions: 1) duration and preservation of the endowment fund; 2) the purposes of the Foundation and the endowment fund; 3) general economic conditions; 4) effect of inflation or deflation; 5) the expected total return from income and the appreciation of investments; 6) other resources of the Foundation; and 7) the investment policy of the Foundation. 16 (Continued)

Although UPMIFA offers short-term spending flexibility, the explicit consideration of the preservation of funds among factors for prudent spending suggests that a donor-restricted endowment fund is still perpetual in nature. Under UPMIFA, the Board is permitted to determine and continue a prudent payout amount, even if the market value of the fund is below historic gift value. There is an expectation that, over time, the permanently restricted amount will remain intact. This perspective is aligned with the accounting standards definition that permanently restricted funds are those that must be held in perpetuity even though the historic-gift-value may be expended on a temporary basis. At, the fair value of certain of these individual funds was less than their historic gift value (underwater funds) by $3,687 and $4,736, respectively, due to investment losses. Unrestricted net assets have been charged for the deficiency caused by these losses. The Foundation classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until appropriated for spending by the Board of Directors. Changes in endowment net assets for the year ended June 30, 2017 are as follows: Temporarily Permanently Unrestricted restricted restricted Total Endowment net assets, June 30, 2016 $ 406 179,002 233,268 412,676 Investment return: Interest and dividends, net 58 3,050 3,108 Realized and unrealized net gains 45,461 45,461 Total investment return 58 48,511 48,569 Contributions received 3,772 3,772 Grants paid (19,173) (19,173) Change in split interests 61 61 Operating expenses (5,567) (5,567) Change in underwater funds 1,049 (1,049) Net assets released from restrictions 25,438 (25,438) Endowment net assets, June 30, 2017 $ 2,272 201,026 237,040 440,338 17 (Continued)

Changes in endowment net assets for the year ended June 30, 2016 are as follows: Temporarily Permanently Unrestricted restricted restricted Total Endowment net assets, June 30, 2015 $ 1,372 209,812 229,863 441,047 Investment return: Investment income, net 35 2,622 2,657 Realized and unrealized net losses (8,567) (8,567) Total investment return 35 (5,945) (5,910) Contributions received 4,005 4,005 Grants paid (20,335) (20,335) Operating expenses (5,559) (5,559) Transfers and reclassifications (7) 35 (600) (572) Change in underwater funds (1,312) 1,312 Net assets released from restrictions 26,212 (26,212) Endowment net assets, June 30, 2016 $ 406 179,002 233,268 412,676 (7) Fixed Assets Fixed assets consisted of the following as of June 30: 2017 2016 Office equipment, computer system, and furniture $ 901 1,397 Leasehold improvements 3,146 2,830 4,047 4,227 Less accumulated depreciation (366) (3,930) $ 3,681 297 Depreciation expense was $269 and $225 for the years ended, respectively. In connection with the early lease amendment for new office space, fixed assets with a gross value of $3,833 were retired as of June 30, 2017, including the $100 remaining net carrying value of abandoned leasehold improvements. New leasehold improvements when completed are estimated to aggregate $4,500, and will 18 (Continued)

be amortized over the remaining amended lease term. Please refer to note 9 for more detail on the lease amendment. (8) Grant Commitments Grants payable of $2,167 and $1,220 as of, respectively, represent unconditional promises to other organizations. In addition, as of, the Board of Directors had authorized the payment of certain grants in future periods, subject to certain conditions to be met by the grantees that have not yet met the conditions for accrual in the accompanying consolidated financial statements. Total grants subject to such conditions are as follows: 2017 2016 Grants subject to conditions to be met by external grantees $ 13,638 16,593 Grants subject to conditions to be met by internal grantees 5,976 6,553 Total grants subject to conditions to be met by grantees $ 19,614 23,146 (9) Lease Commitments The Foundation occupies leased space at 75 Arlington and 420 Boylston Streets in Boston. In October 2016, the Foundation amended its lease of the 75 Arlington space to enable moving from the tenth floor to newly renovated space on the third floor with occupancy effective in fiscal 2018 through September 2030. The lease at 420 Boylston Street continues until September 2018. The Foundation has calculated rent expense for the initial and amended terms of these leases on the straight-line basis. Amounts currently expensed for which payment is not yet due are included in accounts payable and accrued liabilities in the June 30, 2017 consolidated statements of financial position. Base rent expense was $1,607 and $1,363 for the years ended, respectively. Minimum annual rent payments before real estate taxes and operating expense escalations are as follows: 75 Arlington 420 Boylston Minimum Minimum annual rent annual rent Fiscal year payments payments 2018 $ 1,019 370 2019 1,181 93 2020 1,255 2021 1,281 2022 1,306 Thereafter 11,744 19 (Continued)

(10) Employee Benefit Plans The Foundation sponsors a 403(b) defined contribution plan. The current amount contributed by the Foundation for eligible employees is 6% of annual gross salary up to the IRS allowed maximum. All employees are eligible to participate after one year of service. The total cost of the plan charged to the Foundation s operations amounted to $491 and $428 for the years ended, respectively. The Foundation provides deferred compensation plans for its executives as approved by the Compensation Committee of the Board of Directors. The amount contributed was $211 and $226 for the years ended, respectively. (11) Temporarily Restricted Net Assets Temporarily restricted net assets consisted of the following at June 30: 2017 2016 Unappropriated appreciation on endowment funds for: Discretionary purposes $ 151,228 137,593 Designated purposes 47,368 40,362 Endowed donor advised funds 2,430 1,047 201,026 179,002 Purpose restricted: Designated purpose 11,128 10,421 Field of interest 5,983 5,666 Scholarships 1,394 1,329 18,505 17,416 Total $ 219,531 196,418 (12) Permanently Restricted Net Assets Permanently restricted net assets consisted of the following at June 30: 2017 2016 Endowment funds for: Discretionary purposes $ 149,718 149,098 Designated purposes 64,130 63,483 Endowed donor advised funds 23,192 20,687 Total $ 237,040 233,268 20 (Continued)

(13) Operating Expenses A summary of the Foundation s operating expenses for the years ended June 30 is as follows: 2017 2016 Salary and benefits $ 11,133 10,079 Professional fees 1,529 1,491 Meetings, conference events and travel 797 1,097 Marketing 594 583 Office expense 198 194 Technology 772 413 Rent and related occupancy costs 1,490 1,607 $ 16,513 15,464 The Foundation s operating expenses as presented above include $35 and $46 of operating expenses of its supporting organizations for the years ended, respectively. (14) Subsequent Events Management has evaluated events subsequent to June 30, 2017 and through December 14, 2017, the date on which the consolidated financial statements were available to be issued. 21